Over the coming five years or so, AI will have a major impact on HR. It isn’t just AI developers or tech consultants making this claim; it’s also the assessment of CHROs, as evidenced by initial findings from a new and ongoing IMD survey.
While the early results are subject to change, they give a good indication of how CHROs perceive their role in the adoption of AI, how they assess progress on implementation, and some of the challenges that HR teams face in the AI era. The data highlights where CHROs may need a different approach to accelerate on AI and reveal the most effective strategies for building HR’s AI capability.
Here are some key talking points from the data we have collected so far:
AI is poised to have a major impact on HR. Asked to assess on a 10-point scale the likely magnitude of AI’s impact on HR practices over the next five years, the average of early responses is above 7. This suggests that most CHROs and their teams are engaging significantly with AI – and, if they aren’t, they should be. With such fast-evolving technology, a proactive approach is essential.
AI is seen as a tool to improve efficiency. Among the reasons raised by the data for investing in AI in HR, one stands out: the pursuit of efficiency, which more than 40% of early respondents identify as a priority. This imperative aligns with the areas that CHROs believe AI will impact most strongly, including HR analytics and decision-making, front-line employee self-service systems, and talent acquisition and onboarding. In each of these areas, AI could help drive efficiency gains.
Today’s HR teams are taking responsibility for AI. The survey data suggests that the vast majority of CHROs – about nine in 10 – are asking their existing teams to work on AI projects, as opposed to allocating dedicated internal headcount or hiring new talent. This is encouraging, as internal teams will already have a deep accumulated knowledge of their specialist business areas. Setting up separate organizations to lead on innovation and then trying to import their work into the core organization is extremely difficult. A better strategy is to tap into the knowledge already within the organization, providing those who possess it with the tools and frameworks they need to innovate and build valuable internal capability.
CHROs admit to limited knowledge of AI. Notwithstanding the benefits of HR owning AI projects, it’s unclear whether HR currently knows enough about it. Asked to rate their own personal knowledge of generative AI and its potential impact within HR, CHROs give themselves an average score of only about four on a 10-point scale. They also admit to rarely using generative AI outside work. While this rate of adoption is sub-optimal, the self-awareness of CHROs suggests they recognize these shortcomings and are focused on correcting them.
“ CHROs must take an open-minded, experimental approach in order to accelerate on a steep AI learning curve.”
Who is providing AI solutions? Approaches to sourcing AI-based tools for HR vary considerably. The majority of early responders to the IMD survey say they are working with vendors who are expanding their offerings to cater to HR. A minority of them are working with AI-focused providers; slightly more say they are building internal solutions.
CHROs know how quickly the HR systems market is adopting AI. Vendors of major business systems, from ERP to finance to CRM platforms, are adding generative AI and machine learning (ML) capabilities to their offerings. The problem for their customers relying on those platforms – which their competitors are probably also using – cannot provide a competitive advantage. The differentiator is not, therefore, the platform but how they use it. CHROs and their teams must build the skills and AI expertise they require.
When adopting AI, organizations have three options: to buy, customize, or build. Building from scratch is unlikely to be appropriate. As Gartner’s AI Opportunity Radar model underlines, HR is a back-office, inward-facing function. It is not an arena for game-changing AI applications and does not offer big commercial prizes for building new AI systems. The stakes for HR are relatively low.
That means that some off-the-shelf solutions could be a good fit. However, if HR wants to develop into more than simply a passive consumer of AI-powered services, it should engage with providers to customize solutions. This is important not only to meet specific requirements but because it allows HR teams to experiment, learn, and build a new capability that will show its value as the function deploys AI more widely.
For example, one US-based healthcare provider is currently working on customizing its adoption of AI solutions. While it can use readily available systems to meet the majority of its needs, customization can tailor the solutions to specialist requirements that off-the-shelf solutions cannot meet or that allow the organization the opportunity to do something unique with the relevant data.
Deciding where and how to experiment may also be dictated by the availability of ready-to-go solutions. A hospital organization is currently investing in building a chatbot to advise employees on HR policies. This is the sort of tool where standardized solutions developed by the big players in the HR and AI space are likely to dominate the market. But that does not make the current project a waste of time – far from it. In return for only a modest investment, the hospital organization will likely learn a lot from the process, something which leaders should explicitly recognize as a valid goal.
Building internal capability and learning through experimentation with small-scale projects is likely to provide value in the long run for one fundamental reason: The adoption of AI will create great opportunities for HR, as it will for so many areas of business. However, huge though they will undoubtedly be, it’s difficult for businesses to predict where the impacts will land. Most executives are not AI specialists and find it difficult to think about this change systematically.
Indeed, many executives today appear to regard current AI development as static. This is a profound error. Technology is constantly improving. The launch of ChatGPT was eye-opening for most leaders. Most advances will be incremental, but they happen in quick succession, and technology is always building up to another big leap.
Simply put, HR leaders have little chance of understanding how to use AI effectively unless they are willing to get their hands dirty. Experimenting with customized solutions based on today’s technology is an important way for CHROs and their teams to learn more about AI. As they gain skills and knowledge, they will go a long way towards ensuring they can keep up with the changes in the technology landscape.
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